Which sales count toward Ohio’s economic nexus threshold?
Ohio enacted economic nexus in July 2019 and began enforcing it August 1, 2019. Now, more than two years later, the Ohio Department of Taxation has updated an FAQs page to clarify which sales remote sellers should count when calculating the economic nexus threshold.
Under the 2019 law (House Bill 166), a remote seller establishes economic nexus if, in the current or preceding calendar year, it:
- Has gross receipts in excess of $100,000 from the sale of tangible personal property for storage, use, or consumption in Ohio or from providing services the benefit of which is realized in the state; or
- Engages in 200 or more separate transactions selling tangible personal property for storage, use, or consumption in Ohio or from providing services the benefit of which is realized in the state
Although gross receipts “include taxable and non-taxable sales combined” (see FAQ 2), remote businesses making only exempt sales into the state don’t need to apply for a seller’s use license. The department reminds that any business with a physical presence in Ohio is required to register.
In FAQ 15, the department notes that “only those sales which are considered retail sales are included in the economic nexus threshold calculation” because “R.C. 5739.01(I) and R.C. 5739.01(B) defines ‘receipts’ and ‘sales’ to effectually be retail sales.” Ohio doesn’t consider “sales for resale” to be retail sales.
With respect to services, remote businesses should count only sales of services enumerated in R.C. 5739.01(B)(3) when calculating the economic nexus threshold. These include, but aren’t limited to, the following:
- Building maintenance or janitorial services
- Cleaning, painting, polishing, washing, or waxing a motor vehicle
- Installation services for tangible personal property (with certain exceptions)
- Landscaping and lawn care services
- Laundry and dry cleaning services
- Personal care services
- Physical fitness facility services
- Repair services for tangible personal property (with certain exceptions)
- Satellite broadcasting services
- Snow removal services
Sales of services not listed in R.C. 5739.01(B)(3) do not count toward the $100,000 threshold.
Marketplace facilitators have been liable for collecting and remitting Ohio sales and use tax on behalf of third-party sellers (aka, marketplace sellers) since September 1, 2019. Nevertheless, marketplace sellers that make direct sales into Ohio may still be required to register with the Ohio Department of Taxation, collect and remit Ohio sales tax on direct sales into the state, and file returns.
When determining whether they’ve met an economic nexus threshold, marketplace sellers should “aggregate all sales and transactions into Ohio made through all marketplace facilitators as well as any Ohio sales that they make on their own.”
Remote businesses with economic nexus that sell directly into Ohio in addition to selling through one or more marketplaces must report all gross sales on their returns. Sales made through a marketplace facilitator should then be deducted “by listing those sales with their exempt sales.”
Marketplace facilitators that make direct sales in addition to facilitating third-party sales are encouraged to acquire a second account to report their third-party sales. Their direct sales should be reported on their existing vendor’s or seller’s use account.
Sourcing marketplace sales in Ohio
Destination sourcing rules apply to third-party sales facilitated by a marketplace. This means the tax rate is based on the delivery address.
However, origin sourcing rules apply to any direct sales by a marketplace facilitator where the order is received in Ohio. For such orders received in and shipped from Ohio, the rate must be based on the location where the order is received.
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